if i put $4,000 in a Roth does my reportable income reduce by 4,000 for 2006?
2007-01-25 06:40:20 · 3 answers · asked by tony s 2 in Business & Finance ➔ Personal Finance
1. If you deposit 4,000 into ROTH IRA, you do not reduce your reporttable income at all, since this is the nature of ROTH.
2. You can take principle out of ROTH IRA after 5 years without any penalties or explanations, you have to leave the earnings in.
I frankly am not sure if there is a good way to take the principal out before 5 years. If you want to deposit money into ROTH and take them out 6 months later, don't bother. ROTH only makes sense if you put the money and leave them there for a long time, since there is no deduction, so why bother and create a paperwork nightmare if you know you will need the money soon. But If you think you will need the money 7 years from today for examplle and want to park it for now to collect some tax free interest, yes, ROTH could be a good idea, but you will not be able to get the interest out, just the initial deposit.
2007-01-25 08:27:45 · answer #1 · answered by Alexander K 3 · 0⤊ 0⤋
Yes you can take the money out with an exception to buy a house. There are provisions on this exception, I believe that it must be the first home you have purchased in 3 years. Also your income would not be reduced if you purchased a Roth IRA, only if you purchased a traditional IRA. There is also a savers credit available on your taxes if you should qualify. Please discuss with a qualified tax preparer your options and what is the best IRA for you. Remember in order for the contribution to count for 2006 taxes it must be made by 4/17/07. Good luck.
2007-01-25 06:48:04 · answer #2 · answered by misskenzie12 2 · 0⤊ 0⤋
With a Roth IRA, you can always take out the money that you invested, for any reason that you want. But,because the money is able to grow tax free, Rarely, even for a home purchase, is it a good idea to pull money out. The gov't only allows $4K per year because they don't want too much money growing tax free. If you pull the money out then you will be doing the gov't a favor by making more money susceptible to taxes.
2007-01-25 07:00:08 · answer #3 · answered by MR MONEY 3 · 0⤊ 0⤋